Upturn continues, employment lags MANUFACTURING

Encouraged by the business upturn last year, Maryland manufacturers are expecting more of the same this year, barring a damaging interest rate increase by the Federal Reserve Bank.

With backlog and profit margins up, some companies are poised to begin hiring new workers instead of relying on overtime to meet production needs, said J. Alexander Doyle III, the chairman of the Maryland Manufacturers Association.

Yet this hiring would not be enough to offset the general downward trend in manufacturing employment, he said. Defense industry cutbacks, productivity increases and an unfavorable state business climate are expected to continued to weigh on employment.

Looming over the improvement is the chance of more interest rate increases, which would discourage the purchase of automobiles and large appliances, he said.

"We are all concerned about the latest rise," Mr. Doyle said. "Particularly when we hear noises that there are more to come."

But even if business is good this year, factory employment will continue to slide because of improvements in productivity, he said.

State manufacturing employment at the end of October was 178,200, down 0.56 percent from a year ago, according to the Department of Economic and Employment Development. In contrast, the number of factory workers in the nation grew by 1.08 percent in the same period.

Charles W. McMillion, president of MBG Information Services, a Washington-based business information and forecasting firm, said he expects this trend to continue because of a weak supplier network for factories and a continued drop in defense work.

Other problems for the state include its labor rates, access to markets and other business costs, which are more in line with jTC declining northeast states, rather than southern states, where factory employment is expanding, according to Paul S. Lande, senior fellow at the Institute for Policy Studies for the Johns Hopkins University.